An emergency fund, in the most simple words, is an essential fund that will help you in times of an emergency. It is a planned fund that you can rely on if you, unfortunately, lose your job or crash into a medical emergency. Hence it is important to tackle such situations with calmness and it will be possible only if you have done enough planning and savings in advance. Saving for an emergency fund will require you to make certain characteristic changes in your daily routine like cutting down your impulse spending habits, managing monthly expenses in a better manner, and diverting your impulse saving amount into the emergency savings account.
Good research is key to starting with an emergency savings fund. While doing that, you will have to look at some of the non-compromisable factors like a reliable bank or organisation, rate of interest, maturity period, withdrawal options, minimum deposit amount, and certain other factors. You cannot build an emergency fund within a day. Hence you need to be patient and consistent while saving money. A small amount saved today will add up to turn into a huge amount on the day of the emergency. So, it is important to get started today.
Let us look at how to build an emergency savings fund and why you need one.
Why do you need an emergency savings fund?
Without an emergency savings fund, even a minor financial crisis can leave you with the option to dive into debt. A debt possibly can have a long-term and bad impact on your finances as well as your mental being. It must be noted that once if you land up amidst a debt, it will be quite difficult to come out of it and save more money for the future. An emergency fund can act as your backup in time of need. It is important to gain savings today if you do not want to land up in debt or want to avoid any kind of borrowing. Thus it is very important to always save for an emergency without leaving it for tomorrow or sometime in the future. Checkout the Top 10 Actors In India who have emergency saving fund in crore.
- Set a monthly goal
To begin, setting up a monthly financial goal is the first and foremost step for building an emergency savings fund. This will help you have a rough idea of everything that is in your hand. You can begin by noting down all the important and monthly commitments that you need to fulfill every month like an EMI, rent, electricity bill, ration bills, grocery shopping, planned events or outings, and other such things. While noting these, make sure you are honest and true to your budget. Have a rough yet practical estimation of your expenses and savings that you can put aside.
Though $10 may sound like a small amount today, it would be a huge amount when added to your savings. Money, in time of need, is as crucial as getting the right advice in case of an emergency. It will help you survive through the critical times in a balanced manner and without diving into debt.